ECB

Oil Surges Above $140 to Record as Libya Warns of Output Cut

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June 26 (Bloomberg) — Crude oil jumped above $140 a barrel to a record as Libya threatened to cut output, OPEC’s president said prices may reach $170 by the summer and the dollar weakened.

Libya may curb output because of a U.S. law that allows terror victims to seize assets of foreign governments as compensation. OPEC President Chakib Khelil said oil may surge on a European interest rate rise, France 24 reported. Oil, gold and copper climbed today as the dollar dropped because the Federal Reserve gave no signal of higher interest rates yesterday.

“The Libyan comments are helping send us higher,” said Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky. “The Libyans are responsible for only about 2 percent of production, but with supplies tight every missing barrel will have an impact.”

Crude oil for August delivery rose $5.09, or 3.8 percent, to $139.64 a barrel at 2:59 p.m. on the New York Mercantile Exchange, a record settlement price. Futures touched $140.39 today, surpassing the previous intraday record of $139.89 reached on June 16.

Read moreOil Surges Above $140 to Record as Libya Warns of Output Cut

Faster Inflation May Unleash `Financial Tsunami’: Chart of Day

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June 24 (Bloomberg) — Rising consumer prices will leave more U.S. consumers unable to pay their debts and may lead to a “financial tsunami,” according to Bennet Sedacca, president of money manager Atlantic Advisors LLC in Winter Park, Florida.

“Whether it is anecdotal or statistical evidence, I see inflation everywhere, and this is where the financial tsunami cometh,” Sedacca wrote in a report published yesterday. “A battered, over-indebted consumer, if forced to retrench, could create even more problems for the banking system as loan delinquencies would begin to rise even further. All sorts of delinquencies are rising. This is now a systemic issue.”

The four-part chart of the day shows how U.S. householders are struggling to pay their home loans. The top white chart shows the surge in delinquencies on all mortgages, while the yellow one measures foreclosures. The green chart tracks delinquencies on subprime adjustable-rate mortgages, and the purple one shows subprime mortgages that are 60 days behind on their payments.

Sedacca wrote that current financial-market conditions remind him of “someone standing on a lonely beach, armed with only a small bucket, trying to stop a rare tsunami that hits the shores. It is how I feel about our markets and the tools being utilized by the Federal Reserve, the European Central Bank and other regulatory bodies. They are overmatched for what they are facing and, worse yet, they helped create the mess in the first place by being far too easy with money and debt creation.”

To contact the reporter on this story: Mark Gilbert in London at [email protected]

Last Updated: June 24, 2008
By Mark Gilbert

Source: Bloomberg

Dollar Diving

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Dollar to fall to metals in upcoming rallies, rate hikes soon wont be able to fix economic problems, real inflation understated for years, USDX contracts plummet, why arent people fleeing from the stock market… Exchange Traded Funds are a disaster, losses from global write downs, Fed still invited to intervene in spite of failures

The dollar has once again collapsed. Get ready for the next dollar debacle and the coming rally in gold and silver which have just broken out. The elitists have lost all credibility. The would-be lords of the universe have told so many pathological lies that no one “in the know” believes anything emanating from the forked tongues of Buck-Busting, Bear-Bashing, Big-Ben Bernanke and Hanky Panky Paulson. If our Fed Head and Treasury Secretary had been characters in the Walt Disney movie entitled “Pinocchio,” their noses would have quickly grown to lengths that could have been wrapped around the earth’s equator several times. God would have had to reverse the earth’s rotation to extricate them.

Wall Street tells us the odds favor two quarter percent rate hikes to the Fed funds rate by the end of the year. We ask whether that would be before or after the economy collapses? If before, the Fed’s rate hikes will destroy what is left of our economy, and the dollar will collapse, thereby erasing any benefits from the rate hikes. If after, you will see rate cuts instead of rate hikes as the Fed attempts to save the fraudsters on Wall Street who are not even remotely close to recovering from the credit-crunch despite what the elitists might tell you to the contrary. We ask who the morons are that make up these odds, and what planet they come from. They give aliens a bad name. These index predictions are just another form of jaw-boning and disinformation.

As soon as the economy starts its final descent into Davy Jones’ Locker, which is likely to occur in the very near future, the Fed and the US Treasury will unceremoniously toss the so-called “strong dollar” policy into the nearest financial dumpster in order to save the economy and the fraudsters. Accompanying the “strong dollar” policy on its way to the dumpster will be the next round of derivative toxic waste that is on its way courtesy of the upcoming surge in fallout from tanking real estate markets in a process that will see the Fed blow what remains of its general collateral in exchange for such waste. Once the Fed’s general collateral is exhausted, we will be ushered into a new hyperinflationary era characterized by direct monetization of US treasuries to fund our deficits and to absorb more toxic waste as it continues to pour down on elitist financial institutions like Niagara Falls.

A few measly quarter percent cuts will do absolutely nothing to slow the acceleration of inflation, especially if the Fed keeps the M3 at current levels. Only a double-digit Fed funds rate and greatly reduced M3 could have any eventual and meaningful impact on the inflation that is built into the system for at minimum the next year and one half at levels in the area of 15% to 18%, and even then the impact will not be felt until the current baked-in inflation has run its course. Direct monetization of treasuries to replenish Fed collateral and to absorb our growing deficits will put inflation beyond the point of no return, as will the breaking of OPEC dollar pegs.

As you can see, there is no way that any of the proposed diminutive rate hikes will have a positive impact on the economy, on the dollar or on the balance sheets of the fraudsters. Therefore, there will not be any rate hikes. Any increase in the Fed funds rate would be accompanied by an economic catastrophe of epic proportions that would occur as a direct result of the raising of that rate. Any rate hike would take a year to a year and a half to have an impact on inflation. By the time the anticipated Fed rate hikes could have any kind of impact whatsoever, the economy will already be in a state of rampant hyperinflation, and would be well on its way to depression, far too late to save the dollar or the economy. Ergo, the new elitist motto will soon become: “Damn the inflation, full greed ahead!”

Read moreDollar Diving

Morgan Stanley warns of ‘catastrophic event’ as ECB fights Federal Reserve

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Jean-Claude Trichet is taking a hard line on rates

The clash between the European Central Bank and the US Federal Reserve over monetary strategy is causing serious strains in the global financial system and could lead to a replay of Europe’s exchange rate crisis in the 1990s, a team of bankers has warned.

“We see striking similarities between the transatlantic tensions that built up in the early 1990s and those that are accumulating again today. The outcome of the 1992 deadlock was a major currency crisis and a recession in Europe,” said a report by Morgan Stanley’s European experts.Morgan Stanley doubts that Europe’s monetary union will break up under pressure, but it warns that corked pressures will have to find release one way or another.

This will most likely occur through property slumps and banking purges in the vulnerable countries of the Club Med region and the euro-satellite states of Eastern Europe.

“The tensions will not disappear into thin air. They will find fault lines on the periphery of Europe. Painful macro adjustments are likely to take place. Pegs to the euro could be questioned,” said the report, written by Eric Chaney, Carlos Caceres, and Pasquale Diana.

The point of maximum stress could occur in coming months if the ECB carries out the threat this month by Jean-Claude Trichet to raise rates. It will be worse yet – for Europe – if the Fed backs away from expected tightening. “This could trigger another ‘catastrophic’ event,” warned Morgan Stanley.

The markets have priced in two US rates rises later this year following a series of “hawkish” comments by Fed chief Ben Bernanke and other US officials, but this may have been a misjudgment.

An article in the Washington Post by veteran columnist Robert Novak suggested that Mr Bernanke is concerned that runaway oil costs will cause a slump in growth, viewing inflation as the lesser threat. He is irked by the ECB’s talk of further monetary tightening at such a dangerous juncture.


Ben Bernanke is reported to be irked by the ECB’s approach

Read moreMorgan Stanley warns of ‘catastrophic event’ as ECB fights Federal Reserve

RBS issues global stock and credit crash alert

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The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

“A very nasty period is soon to be upon us – be prepared,” said Bob Janjuah, the bank’s credit strategist.

(Got Gold and Silver? More under “Solution” – The Infinite Unknown)

A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

Such a slide on world bourses would amount to one of the worst bear markets over the last century.

  • RBS alert: Quotes from the report
  • Fund managers react to RBS alert
  • Support for the euro is in doubt

    • RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the “Crossover” index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.

    “I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.

    “Cash is the key safe haven. (No way!!! Yet it is still good to have some cash. – The Infinite Unknown)
    This is about not losing your money, and not losing your job,” said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.

    RBS expects Wall Street to rally a little further into early July before short-lived momentum from America’s fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.

    “Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point,” he said.

    US Federal Reserve and the European Central Bank both face a Hobson’s choice as workers start to lose their jobs in earnest and lenders cut off credit.

    The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. “The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation,” he said.

  • Morgan Stanley warns of catastrophe
  • More comment and analysis from the Telegraph

    • “The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets,” he said.

    Read moreRBS issues global stock and credit crash alert

    Fed Claims They Will Get Tough Against Inflation

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    Maybe even tougher than lowering the interest rates, creating money out of thin air, destroying the Dollar and stop publishing the monthly report on M3 because of skyrocketing Inflation! – The Infinite Unknown
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    Top Federal Reserve officials on Tuesday hammered home the U.S. central bank’s determination not to allow inflation to get out of control, cementing views that interest rates will rise later this year.

    The remarks by two regional Fed presidents followed hard-line comments on Monday from Fed Chairman Ben Bernanke that the U.S. central bank would “strongly resist” any deterioration in inflation expectations. Analysts and markets viewed the comments as a sign the Fed — like other central banks — was turning its sights on inflation.
    (It’s sometimes very enlightening to have a closer look at ones own creations. – The Infinite Unknown)

    Dallas Federal Reserve Bank President Richard Fisher, who solidified a reputation as one of the most hawkish members on the Fed’s interest rate-setting Federal Open Market Committee with three dissents against steep rate cuts, echoed Bernanke.

    “We want to make sure the message is clear … that we will not countenance building inflationary expectations,” he told the Council on Foreign Relations in New York.

    Read moreFed Claims They Will Get Tough Against Inflation

    Oil hits new high as Israel calls strike on Iran ‘unavoidable’

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    Oil prices leaped to record highs yesterday as Israel warned about Iranian nuclear sites and the dollar slumped on the biggest jump in American unemployment for 22 years.

    The global crude price ended a run of lower prices earlier this week as it jumped by more than $9 a barrel to $136.79 (£69.44) – it has risen by over $14, or 10%, in just two days. The week before last saw an all-time high of $135.09 a barrel but, by Wednesday this week, prices had receded to as low as $122.

    Already jittery oil markets were sent into spasms by remarks from Israel’s transport minister that an attack on Iranian nuclear sites looked “unavoidable”. Iran is a big Opec oil producer and any attack on the country would threaten oil supplies from the whole region.

    Prices were also boosted by a prediction from investment bank Morgan Stanley that crude prices might reach $150 by July 4.

    Earlier in the day the dollar – in which oil is priced – had fallen against the euro partly on speculation that the European Central Bank might consider raising interest rates to curb inflation.

    But subsequently markets were rocked by a monthly report from the US showing that unemployment suffered its biggest monthly rise since February 1986.

    Shares on Wall Street dived after the US unemployment rate unexpectedly??? jumped to 5.5%, intensifying fears that the world’s biggest economy is sliding into recession.

    The Dow Jones industrial average lost nearly 300 points, or 2.2%, to around 12,320. In London the FTSE 100 closed the week down 1.5%, or 88 points, at 5,906.

    Read moreOil hits new high as Israel calls strike on Iran ‘unavoidable’

    Eurozone inflation reaches 16-year high

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    Eurozone inflation surged to the highest rate for 16 years on the back of sharply higher oil prices as consumer spending in the 15-country region showed further signs of weakness.

    Annual inflation in the eurozone reached 3.6 per cent in May, according to official data released on Friday, up from 3.3 per cent in the previous month. That appeared to rule out any chance of an early cut in interest rates by the European Central Bank, which aims to keep inflation “below but close” to 2 per cent.

    Evidence also emerged that higher prices were wreaking economic damage by forcing households to retrench. Germany reported a surprise 1.7 per cent drop in April retail sales, extending a 2.2 per cent fall in March.

    This week, the European Commission reported eurozone consumer confidence had plunged in May to its lowest level for almost three years.

    As well as driving inflation higher, the soaring cost of fuel has led to Europe-wide protests this week – with fishermen blocking ports in France and on Friday giving out fish free in Madrid.

    Read moreEurozone inflation reaches 16-year high

    Fed joins with European banks to battle credit crisis

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    WASHINGTON (AP) — The Federal Reserve announced Friday that it will expand a series of efforts to deal with the global credit crisis, in coordination with European central banks.The Fed said it was boosting the amount of emergency reserves it supplies to U.S. banks to $150 billion in May, from the $100 billion it supplied in April. The Fed took this action and several other moves to boost credit in coordination with the European Central Bank and the Swiss National Bank.

    The latest moves are part of a series of actions the Fed has made since the credit crisis struck in August.

    The efforts are designed to increase reserves so that banks don’t become hesitant about lending to consumers and businesses, which would make the current economic slowdown even more severe.

    (The continuing bailouts are destroying the dollar and will create a total crash very soon. – The Infinite Unknown)

    Read moreFed joins with European banks to battle credit crisis

    Federal Reserve may Want Inflation

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    We are now importing inflation. This does not only apply to the cost of commodities, such as oil, but also to consumer goods imported from Asia. This is a newer trend as, in our analysis, Asia had been exporting deflation until the summer of 2006; since then, we have seen increased pricing power by Asian exporters.

    Inflation is not just a U.S. phenomenon; as Asian economies are far more dependent on agricultural and industrial commodities, rising inflation may become a serious concern in the region. The stronger and more prudent Asian central banks may realize that allowing their currencies to float higher versus the U.S. dollar may be the most effective way to combat inflationary pressures.

    Read moreFederal Reserve may Want Inflation

    The Collapsing Dollar – Authorities lose patience

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    Jean-Claude Juncker, the EU’s ‘Mr Euro’, has given the clearest warning to date that the world authorities may take action to halt the collapse of the dollar and undercut commodity speculation by hedge funds.


    Jean-Claude Juncker, who is calling for Washington to
    take steps to halt the slide of the dollar

    Momentum traders have blithely ignored last week’s accord by the G7 powers, which described “sharp fluctuations in major currencies” as a threat to economic and financial stability. The euro has surged to fresh records this week, touching $1.5982 against the dollar and £0.8098 against sterling yesterday.

    “I don’t have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting,” he said.

    Mr Juncker, who doubles as Luxembourg premier and chair of eurozone financiers, told the Luxembourg press that he had been invited to the White House last week just before the G7 at the urgent request of President George Bush. The two leaders discussed the dangers of rising “protectionism” in Europe. Mr Juncker warned that matters could get out of hand unless America took steps to halt the slide in the dollar.

    Read moreThe Collapsing Dollar – Authorities lose patience

    Dollar’s nosedive stirs joint intervention jitters

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    TOKYO (Reuters) – The dollar’s sharp slide to 13-year lows against the yen and fresh all-time lows versus the euro on Monday is stoking jitters about the possibility of joint central bank intervention to prop up the dollar.”The speed of the slide in the dollar/yen is so rapid that U.S. action alone can no longer stop the dollar’s downward trend,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investment.

    “The time is ripe for coordinated intervention by U.S., European and Japanese authorities.”

    yen-wwwreuterscom.jpeg

    Read moreDollar’s nosedive stirs joint intervention jitters

    Fed Prints Another $200 Billion Out Of Thin Air

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    World central banks unite to ease credit strain

    WASHINGTON (Reuters) – The U.S. Federal Reserve and four other central banks on Tuesday teamed up to get hundreds of billions of dollars in fresh funds to cash-starved credit markets, allowing financial firms to use securities backed by home mortgages as collateral for central bank loans.

    bernanke.jpeg

    Stocks surged, bonds fell and the long-suffering U.S. dollar soared in reaction to the moves, a sign financial markets saw the plan as a step in the right direction to ease a crisis that has threatened world economic growth. The Dow Jones industrials closed nearly 3.6 percent higher.

    In the latest effort to ease a credit contraction that has disrupted global finance, the Fed, Bank of Canada, Bank of England, European Central Bank and Swiss National Bank announced a series of aggressive measures to boost liquidity. It was the second time in three months that central banks from around the globe had launched coordinated efforts.

    Wall Street economists were quick to call the new lending facility a step in the right direction, but what’s most needed is time for the de-leveraging of billions of dollars in loans globally.

    Read moreFed Prints Another $200 Billion Out Of Thin Air